The European Commission has introduced two significant legislative proposals: the third Payment Services Directive (PSD3) and the Payment Services Regulation (PSR). These initiatives aim to enhance the European payments market by building upon the foundations of PSD2, striving for greater harmonization and reducing national discrepancies.
- PSD3. Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on payment services and electronic money services in the Internal Market amending Directive 98/26/EC and repealing Directives 2015/2366/EU and 2009/110/EC [link]
- PSR. Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on payment services in the internal market and amending Regulation (EU) No 1093/2010 [link]
Objectives of PSD3 and PSR
The primary goals of PSD3 and PSR include:
- Combating Payment Fraud: Implementing measures to detect and prevent fraudulent activities, thereby safeguarding consumers and financial institutions.
- Enhancing Consumer Rights: Strengthening protections to ensure consumers have greater control and transparency over their financial transactions.
- Leveling the Playing Field: Ensuring fair competition between banks and non-bank entities by standardizing regulations across the board.
- Advancing Open Banking: Improving the framework to facilitate secure and efficient data sharing between financial institutions and third-party providers.
- Ensuring Cash Availability: Guaranteeing that consumers have adequate access to cash through various channels, including ATMs and retail outlets.
- Harmonizing the EU Payment Market: Reducing national variations to create a more unified and efficient payment landscape across the European Union.
Key Differences Between PSD3 and PSR
While both PSD3 and PSR aim to refine the regulatory environment, they serve distinct functions:
- PSD3: As a directive, PSD3 focuses on the licensing and operational aspects of payment service providers. It requires transposition into national laws, allowing for some degree of flexibility in implementation across member states.
- PSR: In contrast, PSR is a regulation that becomes directly applicable in all EU member states without the need for national legislation. It encompasses rules related to transparency, payment transactions, and the management of operational and security risks.
Implications for Stakeholders
- Consumers: The new regulations promise safer and more transparent payment services. Enhanced Strong Customer Authentication (SCA) methods will contribute to more secure purchasing experiences. Additionally, consumers will benefit from stricter rules governing access to their payment and account information, along with improved mechanisms to manage permissions granted to various service providers.
- Banks and Payment Service Providers: Financial institutions will face stricter performance and compliance requirements. This includes obligations to enhance technical infrastructures, adhere to uniform standards across the EU, and implement more robust fraud prevention measures. Non-compliance could result in tougher sanctions, emphasizing the need for institutions to align closely with the new regulatory framework.
Timeline and Implementation
The legislative proposals for PSD3 and PSR are currently under review by the European Parliament and Council. Final versions are anticipated by 2025. Considering the typical 18-month transition period granted to EU member states, it is expected that PSD3 and PSR will become applicable during 2027.
These developments mark a significant evolution in the European payments landscape, aiming to foster innovation, enhance security, and ensure a more integrated market for all participants.
Summary by Riho Vedler, DigitalTrade4.EU